It would have been an anticlimax if it hadn’t been expected.The “crisis program” that President Boris Yeltsin and Prime Minister SergeiKirienko presented June 23 to cabinet ministers and parliamentary leaderswas a second serving of the same nasty vegetables no one would eat before.The government wants a new tax code, enforceable through new and tougherbankruptcy laws; spending cuts, including large reductions in the federalpayroll; reassertion and enforcement of the federal alcohol monopoly;improved regulation of the banking system; and a number of other measures.Six of an expected twenty new bills have already been put before the Duma.
President Yeltsin told the legislative leadership the bills must pass withina month or “other measures will be taken.” The exact meaning of the threat- dismissal of the Duma and rule by decree? – he left unclear. Oppositiondeputies said they would not be bullied, although they have been routinelybullied since Yeltsin destroyed the Duma’s predecessor, the Supreme Soviet,with a deadly armored assault on the capitol in 1993.
The stakes this time are high indeed. There is no certainty that thegovernment’s program will rescue the country from its financial crisis, butwithout it prospects are extremely bleak. The government is spending morethan it takes in, by perhaps $30 billion this year. It has no tolerable wayto finance the gap.
To borrow from Russians takes interest rates so high – the yield on treasurybills has exceeded 50% for over a month and stood Friday at 64% – that theshort-term inflow of cash from the loan is quickly offset by the outflow ofinterest payments. To borrow from foreigners is similarly expensive, iflenders can be found at all. Recent asset sales failed to find buyers atminimum prices. As a last resort, the Finance Ministry could curb outlaysby stiffing creditors through a forced or negotiated stretch-out of publicdebt. Or the Central Bank could balance the books in a pact with the devilof inflation, by devaluing the ruble and printing many more of them.
The thought that bondholders might join coal miners, teachers, soldiers, andpensioners in the long line of Russia’s Great Unpaid is a chilling one tothe International Monetary Fund. Western banks, after all, have outstandingclaims against Russia amounting to $72 billion, including $30 billion heldby German banks and $7 billion by banks in the United States. The Fund,which has loaned Russia over $30 billion since 1991, reluctantly releasedanother $670 million last week, two weeks after Fund management hadrecommended the disbursement to the IMF executive board. The Fund alsoagreed to extend the three-year, $9.2 billion support program it launched in1996 into the year 2000, possibly with additional funds tacked on.
But Russia wants more. Anatoly Chubais, twice fired from the government butstill Boris Yeltsin’s financial fix-it man of choice, has been talking up afigure of $10 billion – $15 billion. The IMF is unlikely to come acrosswith that kind of money any time soon, if ever. Itself strapped forresources, the Fund is bitterly disappointed in Russian performance,especially in the prolonged failure to collect taxes. Prime MinisterKirienko says Russian companies owe the government 150% of what thegovernment takes in, and taxes collected are only about 11% of grossdomestic product – less than half of the average in the West.
The IMF, facing a tough fight in the United States Congress over a bill toreplenish its capital, needs to show that it lends to support reform, nottax evasion. Any new program would have to ensure – much more stringentlythan past programs have been able to – that promised changes actually takeplace.